Disaster Capitalism in Action

UK Cuts Bonuses to Bailed Out Banks by More than 90%

The U.K. government will cut bonuses at Royal Bank of Scotland Group Plc by more than 90 percent and eliminate them for many executives in a bid to end 'rewards for failure.' Executives responsible for the bank’s record 28 billion pound ($40 billion) 2008 losses will receive no bonuses, a Treasury spokesman said. Britain’s biggest government-owned bank said it will impose a pay freeze for directors and executives, and all other pay rises will be below the rate of inflation.

"The same principles on bonuses will apply to Lloyds Banking Group Plc, 43 percent government-owned, Chancellor of the Exchequer Alistair Darling said. 'Don’t reward failure,' he told Sky News today. 'That’s as good for Lloyds as it is for RBS,' he said."

Morgan Stanley, Citigroup to Give Brokers Big Retention Fees

"Building the biggest brokerage firm on Wall Street is proving costly to Morgan Stanley and Citigroup Inc., which are planning to pay brokers about $3 billion to keep them from being poached away from the joint venture, people familiar with the matter said.

"While the terms aren't expected to be announced until later this month, the issue could grow politically sensitive, because the U.S. government holds stakes in Citigroup and Morgan Stanley as part of its bailout of the financial system. Morgan Stanley is paying Citigroup $2.7 billion to take control of the joint venture, which was announced last month and will combine its brokerage operation with Citigroup's Smith Barney unit....

"The pay packages, ranging from 50% to about 260% of a broker's annual production, are rubbing some the wrong way, especially at a time when financial-services firms have taken government money and many of the brokers' clients are suffering losses. Depending on the size of the individual broker's business, the payments can exceed $10 million."

Blackwater Changes Company Name to Xe

Blackwater has gone to ground--sort of. In a move to apparently distance itself from its image as reckless cowboys that was etched into the world's mind from the September 2007 Baghdad Nisoor Square shoots, Blackwater USA is once again rebranding itself. It has changed its name (and presumably legal structure) to Xe. (Pronounced, 'Z' as in 'Xena, Warrior Princess.')...

"Given that the Iraqi government recently kicked Blackwater out of the country and BW subsequently lost that portion of a larger State Department security contract, the move is most likely to distance itself from this past so closely associated with the Bush Administration's questionable Iraq policies and to make contracting with it more palatable for government organizations and private entities. In a few years, everyone will still remember Blackwater, but few will recall that Xe (again, pronounced 'Z' as in 'Xena, Warrior Princess.') is indeed its successor. The cryptic name is unlikely to incite strong public opposition or at the least the fear of it.

"It is unclear if the new legal structure will help limit the legal liabilities of Blackwater, containing them within the Blackwater USA, LLC structure and shielding the new entity."

Halliburton, KBR Pay $579 Million in Corruption Case

"Halliburton and Kellogg Brown & Root have agreed to pay $579 million in fines related to allegations of foreign bribery, the biggest fines ever paid by U.S. companies in a foreign corruption case, federal authorities and the companies said yesterday.

"The Securities and Exchange Commission and Department of Justice alleged that Houston-based Halliburton and KBR were part of a joint venture that spent $182 million to bribe Nigerian government officials over a 10-year period to win more than $6 billion in construction contracts."

Merrill Lynch Gave $1 Million Each to 700 of Its Staff

"Merrill Lynch & Co. 'secretly' moved up the date it awarded bonuses for 2008 and richly rewarded its executives despite billions of dollars in losses, giving bonuses of $1 million or more apiece to nearly 700 employees, New York Attorney General Andrew Cuomo said.

"In a letter to House Financial Service Committee Chairman Barney Frank, (D., Mass.), Mr. Cuomo said the Wall Street firm awarded $3.6 billion in bonuses to more than 39,000 employees before its Jan. 1 purchase by Bank of America Corp., including more than $121 million to four top executives.

"Mr. Cuomo, who is probing compensation practices at financial firms, said he was told by Merrill's board in November that any bonuses to be paid would be 'based upon a combination of performance and retention needs.'

"'Rather, in a surprising fit of corporate irresponsibility, it appears that, instead of disclosing their bonus plans in a transparent way as requested by my office, Merrill Lynch secretly moved up the planned date to allocate bonuses and then richly rewarded their failed executives,' Mr. Cuomo wrote in his letter."

Obama Administration Continues Bush's State Secrets Position

"The Obama administration backed the Bush administration's arguments in a lawsuit involving the practice of seizing terror suspects abroad and sending them to third countries for questioning.

"The case involves five men who claim U.S. operatives abducted them and sent them to be tortured in other countries. The men are suing a unit of Boeing Co., which they say provided aircraft to the Central Intelligence Agency for the 'extraordinary rendition' program. Boeing declined to comment on the case.

"Monday, Justice Department lawyers told the Ninth Circuit federal appeals court in San Francisco that the government believes state secrets and national security would be put at risk if the court allows the suit to proceed. That is the same argument the department used under President George W. Bush."

Former Citigroup Executives Hired as Senior Advisers to the Obama Administration

"Senior executives at Citigroup’s Alternative Investment division ran up hundreds of millions of dollars in losses last year on their esoteric collection of investments, including real estate funds and private highway construction projects, even as they collected seven-figure salaries and bonuses. Now the Obama administration has turned to that Citigroup division — twice — for high-level advisers.

"Jacob J. Lew, who served until late last year as the chief financial officer of Citigroup Alternative Investments, has been named deputy secretary of state, the department’s No. 2 position. Michael Froman, another former chief financial officer at the Citigroup division, has joined the White House staff as deputy assistant to the president and deputy national security adviser for international economic affairs....

"'You sort of have to wonder why it is so smart to put them in charge now, if they helped create the mess that we are in,' said Melanie Sloan, executive director of Citizens for Responsibility and Ethics in Washington. 'They wouldn’t strike me as the natural choice.'"

2/3 of Funds for Post-Katrina Reconstruction Still Unspent

"A massive effort to fix public works destroyed more than three years ago by the Gulf Coast hurricanes remains largely stalled, leaving more than $3.9 billion in federal aid unspent and key repairs far from complete....

"Nearly 3½ years after those storms hit, new FEMA accounting reports show two-thirds of the money to pay for permanent rebuilding work still has not been spent, the latest bottleneck in a recovery long beset by criticism that it has been too slow and inefficient. And despite a handful of high-profile successes, officials who had vowed to speed up the pace of repairs concede it is still going far more slowly than it should."

"Chevron Corp., which prevailed in a human-rights lawsuit seeking to hold it responsible for the shooting of Nigerian protesters at an oil platform, is seeking nearly $500,000 in legal costs from the villagers who brought the suit.

"Chevron's claim for reimbursement, filed in federal court, includes $190,000 in copying charges. The San Ramon-based company, which posted a record $23.8-billion profit for 2008, says it is entitled to the money because a nine-member jury decided in the company’s favor in December....

"Laura Livoti, founder of Bay Area-based Justice in Nigeria Now, said the $485,000 sought by Chevron, California's largest company, would constitute a fortune for the Nigerians. That sum would be enough to sustain at least four villages in the Niger Delta for a year, she said....

"Bert Voorhees, who represented the Nigerians at trial, said Chevron's goal was not necessarily to collect money from the plaintiffs but to deter others from pursuing similar suits."

Disgraced HBOS Bankers Received Their Goodbyes in Cash

Disgraced banking boardroom executives at HBOS walked away with cash payments worth hundreds of thousands of pounds each, the Guardian has learned. Executives were handed the cash after HBOS was rescued by Lloyds TSB and the takeover formally activated a "change of control" clause in their contracts....

"It comes as millions of pounds of bonuses are about to be paid to employees who remain at Royal Bank of Scotland. The cash payments at HBOS were made at the discretion of the bank, which has received £11bn of taxpayer funds and been folded into the Lloyds Banking Group.

"The bank is understood to have allowed share-based performance schemes to pay out in cash rather than shares. Such schemes might more ordinarily roll into the shares of the new company. The directors are thought to have received 10% of the value of the shares at the time they were granted, rather than their current value. Some of the shares were granted at £11 but were valued at less than 70p when the rescue takeover went through."